- Mexico buys put options from US financial institutions on oil.
- A change in government may see that hedge out soon.
- Ultimately, it looks as if the hedging strategy will remain in place.
The Mexican oil hedge, or the Hacienda Hedge, is considered the biggest hedging bet on Wall Street as well as perhaps the most secretive. It has earned Mexico—and a few large investment banks—billions of U.S. dollars.
Mexico buys put options from investment banks and typically hedges a whopping 200-300 million barrels of oil a year. With the put options, it has the right, but not the obligation, to sell oil at a previously set price and timing. But will this tradition continue under the newly elected administration?See the rest of the story at Business Insider
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